The Front Page, Asset Management & Investment Funds: Irish Practice Developments
The Front Page, Asset Management & Investment Funds: Irish Practice Developments
Companies Act 2014 commences 1 June 2015
As most recently noted in the March Front Page, the Companies Act 2014 will come into effect on 1 June 2015. For more information on the impact of the Companies Act 2014 on Irish investment funds and fund management companies please see our Q&A document which sets out questions relevant to Irish investment funds and fund management companies or speak with your usual contact in A&L Goodbody's Asset Management & Investment Funds team.
Central Bank Annual Report and Annual Performance Statement
The Central Bank plans to conduct 32 AML inspections during 2015 and will continue to conduct AML/CFT risk evaluations.
The Central Bank will continue to raise standards of compliance and culture in investment firms and fund service providers in 2015 through programmed supervisory engagements under PRISM, reactive supervisory interventions, monitoring of regulatory reports and a programme of themed inspections.
The programme of themed inspections will include the items listed below.
Cyber Security / Operational Risk - Inspection of controls and procedures around system security and access.
Integrity of Regulatory Returns - Review of firms’ regulatory reporting.
Treatment of Pricing Errors for the Calculation of Fund NAVs - Examination of the processes for the treatment of pricing errors and the payment of compensation.
Depository Oversight - Review of depositary oversight of investment funds including the depositary’s annual report to investors.
Suspicious Transaction Reports (STRs) - Follow-up on previous themed-inspection from 2013 related to market discipline in filing STRs.
Person Discharging Managerial Responsibilities (PDMRs) - Review of policies and practices in relation to notification of relevant trading activity by persons discharging managerial responsibility in listed firms.
Risk Management in UCITS - Examination of the on- going application of risk management processes employed by UCITS.
Corporate Governance Code for ManCos and CIS, following the 2014 review and the conclusion of policy recommendations arising from CP86 on Fund Management Company Effectiveness-Delegate Oversight, the Central Bank will engage with the Irish Funds Industry Association (IFIA) to update the current Corporate Governance Code for ManCos and CIS.
EuSEFs and EuVECAs
On 20 May 2015 the Minister for Finance published the European Union (European Social Entrepreneurship Funds) Regulations 2015 (SI 166/2015) and the European Union (European Venture Capital Funds) Regulations 2015 (SI 167/2015). These two pieces of legislation designate the Central Bank as the Competent Authority for European Social Entrepreneurship Funds (EuSEFs) and European Venture Capital Funds (EuVECAs). Both EuVECAs and EuSEFs are part of the European Commission's programme to expand capital markets in Europe and decrease the reliance on bank finance.
EuVECAs are the result of a European Commission project designed to strengthen venture capital financing across the European Union (EU) in order to realise the commercial potential of European small and medium enterprises. EuVECAs allow EU-registered Alternative Investment Fund Managers (AIFMs) to manage certain types of qualifying venture capital funds domiciled in the EU and to market, EuVECAs to professional (and certain other) investors throughout the EU. EU registered AIFMs can market EuVECAs on a cross-border basis within the EU by way of a EuVECA passport without the threshold restrictions that apply to using a passport under the Alternative Investment Fund Managers Directive (AIFMD – Directive 2011/61/EU).
Sitting alongside EuVECAs, the European Commission has introduced the EuSEF regime as a means by which investment management products can intermediate capital from investors to "social businesses". As with EuVECAs, EU registered AIFMs can market EuSEFs to professional (and certain other) investors on a cross-border within the EU without the threshold restrictions that apply to using a passport under AIFMD.
Client Assets and Investor Money
As discussed in the March and April editions of the Front Page, the Central Bank published the Investor Money Regulations and related Guidance in March 2015. The regime will come into effect on 1 April 2016. The Central Bank hosted an industry seminar on the Investor Money Regulations where it provided an overview of the definitions and each of the six principles covered by the Investor Money Regulations as well as information about the Central Bank’s expectations on the implementation of each of the principles. The IFIA Investor Money Working Group produced an industry information note with an overview of the regime, highlighting the main points and impact applicable to Fund Service Providers. Please speak with your usual contact in the A&L Goodbody Asset Management & Investment Funds team if you would like a copy of the presentation and notes.
The Central Bank will continue to engage with industry between now and April next year to ensure an efficient implementation of the Investor Money Regulations across the funds industry. An IFIA group is also in discussion with the Central Bank on the practical working of subscription / redemption accounts which are fund assets (i.e.not belonging to a Fund Service Provider) and which therefore sit outside the Investor Money Regulations. This work is ongoing and we will provide updates of developments in future editions of the Front Page.
Central Bank Consultation (CP94) on Corporate Governance Requirements for Investment Firms.
On 5 May 2015, the Central Bank of Ireland published a consultation paper (CP94) on Corporate Governance Requirements for Investment Firms. The consultation period will close on 5 August 2015. In line with the development of corporate governance standards in other sectors of the financial services industry, this consultation represents continuous work by the Central Bank to develop and ensure adherence to sound corporate governance standards for investment firms.
The Consultation Paper sets out the proposed requirements firms will be required to comply with, including:
minimum board size;
the composition of the board;
the role of the Chairman;
the role of the CEO;
the frequency of board meetings;
the role and composition of the risk committee, and
the role and composition of the audit committee.
For further information, please speak with your usual contact in A&L Goodbody's Asset Management & Investment Funds team
Fitness & Probity Guidance
On 3 September 2014 the Central Bank published S.I. No 394 of 2014 prescribing six new Pre-Approval Controlled Functions (PCFs) pursuant to Section 20 and 22 of the Central Bank Reform Act which came into effect on 31 December 2014. The following are the new PCFs:
The office of Chief Operating Officer (PCF-42) for all regulated financial service providers;
Head of Claims (PCF-43) for Insurance Undertakings;
Signing Actuary (PCF-44) for Non-Life Insurance Undertakings and Reinsurance Undertakings;
Head of Client Asset Oversight (PCF-45) for Investment Firms;
Head of Investor Money Oversight (PCF-46) for Fund Service Providers;
Head of Credit (PCF-47) for Retail Credit Firms
Relevant Regulated Financial Service Providers (RFSPs) to whom the new PCF roles are applicable must submit (via ONR by 30 June 2015) an online RFSP InSitu Application return for individuals who held the new PCF roles as at 31 December 2014. Each RFSP must confirm that they have undertaken the necessary due diligence in relation to the individuals who held those PCF roles. The Central Bank has issued Guidance on submitting confirmation of due diligence undertaken on in Situ PCFs. The Central Bank has also issued an updated Fitness and Probity FAQ , updated Guidance on Fitness and Probity, an InSitu PCF Information Template, In Situ PCF Guidance and Instruction and a Quick Reference Guide - Submit an In Situ Return for Non-Credit Unions.